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89 Am. Bankr. L.J. 327 (2015)
Credit Access after Consumer Bankruptcy Filing: New Evidence

handle is hein.journals/ambank89 and id is 339 raw text is: Credit Access After Consumer Bankruptcy Filing: New Evidence by Julapa Jagtiani and Wenli Li* ABSTRACT This article analyzes a unique data set to shed new light on credit availabil- ity to debtors who filed for consumer bankruptcy. In particular, our data set allows us to distinguish between Chapter 7 and Chapter 13 debtors, to observe changes in credit demand and credit supply, and to differentiate between ex- isting and new credit accounts. The paper has four main findings. First, de- spite speedy recoveries in their credit scores after bankruptcy filings, most debtors have reduced access to credit after filing for bankruptcy including re- duced limits. The impact seems to be long lasting-well beyond the discharge date. Second, the reduction in credit access stems mainly from the supply side because credit demand by consumers recovers significantly after the filing, whereas credit supply by lenders remains low. Third, new lenders do not treat debtors who filed for Chapter 13 bankruptcy more favorably than debtors who filed for Chapter 7. In fact, debtors who filed for Chapter 13 are much less likely to receive new credit cards than debtors who filed for Chapter 7. Finally, we find that debtors who filed for Chapter 13 receive, on average, a slightly larger credit limit than debtors who filed for Chapter 7 bankruptcy (both after the filing and after discharge) because they are able to maintain more of their old credit that existed before bankruptcy. Our results suggest that although debtors receive a fresh start through bankruptcy (in the form of dischargeable debt), the fresh start they obtain does not necessarily guarantee new credit for them. *Julapa Jagtiani, Special Advisor, Supervision, Regulation & Credit, Federal Reserve Bank of Philadel- phia, Julapajagtiani@phil.frb.org; Wenli Li, Senior Economic Advisor & Economist, Federal Reserve Bank of Philadelphia, Wenli.Li@phil.frb.org. Special thanks to Ian Kotliar, Raman Quinn Maingi, and Anna Veksler for their outstanding research assistance. We thank Allen Berger, Benjamin Keys, William W. Lang, Geng Li, Leonard Nakamura, seminar participants at various conferences, the journal editors, and two anonymous referees for their helpful comments. The views expressed here do not necessarily re- present those of the Federal Reserve Bank of Philadelphia or the Federal Reserve System. 327

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